Oil And The Industrials Led The Market

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By: Kent Engelke | Capitol Securities

The Dow advanced about 0.4% while the NASDAQ was unchanged as the industrials and oil lifted the value shares. Earnings for several large named industrials exceeded expectations, while profits for some of the mega-capitalized technology names disappointed.

As noted, oil surged 4.6%, the most since November, as Saudi Arabia pledged to reduce exports in August by 1 million barrels a day. Moreover, the political and economic strife is great in Venezuela as its society is on the brink of imploding, threatening its 2 million barrel per day exports. Demand for oil is also at a record according to the IEA. Inventories as measured by the American Petroleum Institute were reported late in the day and fell about 4x more than forecasted.

Treasuries sold off as consumer confidence is surging. The “Present Condition Index” rose to a 16-year high and the gauge of consumer expectations for the next six months also increased. In other words, the consumer is the most optimistic since 2001 and is expecting conditions to improve even more during the next 6 months.

Further discussing consumer sentiment, the “Labor Differential” or the index designed to measure the share of those saying jobs are plentiful minus the share, is expected to widen to 16.1%, the most six August 2001, a bullish sign for employment and potential wage gains.

Will this decade and half high sentiment transcend into the real economy? Will second quarter GDP which is released Friday exceed expectations? Perhaps the Federal Reserve will make some statement about current and expected growth rates at the conclusion of today’s meeting.

Last night the foreign markets were up. London was up 0.36%, Paris was up 0.61% and Frankfurt was up 0.28%. China was up 0.12%, Japan was up 0.48% and Hang Sang was up 0.33%.

The Dow, led by the industrials and oil, should open nominally higher. The 10-year is up 3/32 to yield 2.32%.

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